QBE chairman defends remuneration model

QBE chairman John Cloney has written to shareholders defending the big insurer's remuneration arrangements in the face of criticism leveled by risk management specialist, Risk Metrics.

In his letter, released to the Australian Securities Exchange, Cloney defends the retirement benefits being granted to QBE chief executive Frank O'Halloran and makes clear that with O'Halloran's agreement, they have been amended to a lump sum payment of one year's annual base salary.

Previously, O'Halloran's arrangement had involved a lump sum payment of 150 per cent of his total remuneration cost being his annual base salary plus his short-term cash incentive for the year prior to the date of his retirement.

Cloney's letter also complains that the Risk Metric reports give the impression that there are no hurdles with respect to QBE's Deferred Compensation Plan and argues "the reality is significant targets need to be achieved to earn a short-term cash incentive".

He pointed out that the new Group Executive Restricted Share Plan also only applied where there was super performance, meaning a return on equity above 22 per cent.

Cloney's letter then argued that the wealth of the chief executive ought to be irrelevant to whether investors voted for or against the remuneration report.